Brazilian beef company Marfrig (SAO:MRFG3.SA), supplier to the likes of Nestlé (OTCM:NSRGY), McDonalds (NYSE:MCD) and Burger King (part of Restaurant Brands International NYSE:QSR), stands accused of sourcing cattle from farms on illegally occupied indigenous lands.
- Illegal farms have encroached on the Menku territory of the Mỹky people, where they have raised cattle that has been sold by Marfrig into the global beef supply chain.
- The beef trade is widely associated with rampant deforestation and disregard of indigenous human rights, but its supply chains remain worryingly opaque.
- Increasing pressure from investors, governments and consumers alike suggest that the market may be shifting, and that the global beef industry will soon have to clean up its act in response.
Only a small portion of the Menku territory, which sits on the border of the Amazon rainforest and the Cerrado savana, has been officially recognised as belonging to the Mỹky people, while the remainder has been subject to ongoing legal dispute.
During this period, farmers have invaded the land and begun raising cattle. The Mỹky community has filed a case with Brazil’s supreme court, claiming that the big agricultural takeover has restricted their fishing and hunting areas, contaminated their land with pesticides and left them vulnerable to persecution.
The farmers claim that the land is free to occupy since much of it has not been legally assigned, yet should be protected under Article 231 of the Brazilian Constitution of 1998, which acknowledges the inalienable right of indigenous peoples to lands they ‘traditionally occupy’ and automatically awards them permanent posession of their territories.
Marfrig, the global beef supplier which stands accused of sourcing cattle from the Menku territory farms, claims it does not procure livestock from farms that illegally encroach on Indigenous land or destroy sections of rainforest.
Recent investigations tell a different story, however, with the slaughterhouse to which the Menku territory cattle were taken having also been associated with 150 square km of deforestation within the past six years. Previous reports have also linked Marfrig’s supply chain to illegal ranchers in the Apyterewa territory, one of the most deforested indigenous lands to date.
Lack of transparency in the global beef trade
The Mỹky peoples’ case raises fresh concerns about the lack of transparency within the global beef trade, which is already widely associated with rampant deforestation and disregard of indigenous human rights.
Deforestation accounts for almost 15% of global CO2 emissions, yet the Brazilian government of President Bolsonaro has continuously weakened its environmental law enforcement, enabling the country’s beef industry to continue destructing the Amazon rainforest.
Indigenous reservations, which have previously served as a barrier against industrial deforestation, have increasingly been left open to invasion by the agricultural sector.
The beef supply chain, however, is largely opaque, involving several intermediaries before reaching its end consumer. This lack of transparency is clearly exemplified by the companies associated with the cattle raised on the Menku territory, with Nestlé claiming that it phased Marfrig out of its supply chain in 2021 but has not yet updated its list of suppliers while Burger King has simply stated that it does not discuss its strategic suppliers.
McDonalds, meanwhile, could arguably be accused of misleading its customers with regards to where its meat is sourced. Its consumer-facing UK website advertises its burgers as being made from 100% British and Irish beef, failing to acknowledge that its global beef supply includes markets in Brazil, the US, Australia, Canada and Europe.
Businesses under pressure to do better
The fast-moving consumer goods (FMCG) sector is facing increasing pressure from all sides to address these issues.
Investors are growing more aware of the material risks that are impacting global commodity trade, with estimates suggesting that changes in forest ecosystems could hit the cattle, timber and paper industries with up to $80 billion in supply chain risk. This raises serious financial concerns that will cause investors to apply greater scrutiny to companies involved in such trade.
Further contributing to investor concerns is the increasing regulatory pressure on global supply chains. With the UN having recognised the human right to a clean, healthy and sustainable environment in 2022, cases of climate litigation against governments are on the rise.
As more environmental cases begin citing human rights law, particularly in regards to indigenous communities, policy-makers are likely to introduce stricter measures to ensure that commodities brought into their country have been sourced fairly and sustainably.
UK supermarket Tesco (LSE:TSCO), for example, has already called on the government to ensure that all food sold in the country is not linked to deforestation. Its request comes in response to a Greenpeace campaign that demanded it end its links with JBS, a meat company alleged to have sourced from farms involved in the Amazon’s deforestation.
Tesco’s call demonstrates a third point of pressure facing the FMCG sector, that of its end consumers, with a petition launched against the company’s meat sourcing activity having gained almost 265,000 signatures to date.
While Tesco deflected the complaint towards its government, similar pressure resulted in Sainsbury’s (LSE:SBRY) and five other European supermarket chains pledging to end their sale of beef products originating from Brazil.
Their action provides some hope for the 55% of British consumers that would not consider buying meat from companies that procure their supply from farms on land that had recently been deforested.
Indeed, the market is already showing signs of shifting, with 100 governments having signed a COP26 pledge to end deforestation by 2030. The pledge has resulted in the launch of the Innovative Finance for the Amazon, Cerrado and Chaco (IFACC) programme, which committed $3 billion towards the acceleration of deforestation free soy and cattle production in South America and has already been supported by an £11 million investment from a group of UK supermarkets.
As this pressure from investors, governments and consumers continues to rise, it seems the global beef industry will soon be forced to adjust in response.